Physical attractiveness, same-sex stimuli, and male venture capitalists' financial risk-taking.

Abstract

Financial risk-taking is central to venture capital decision-making, which is increasingly approached from a heuristics and biases perspective. While previous research has identified entrepreneurs’ physical attractiveness as an important heuristic cue in VCs’ investment decisions, this study addresses the role of VCs’ own physical attractiveness in relation to the financial risks they take. Using a dataset for a representative sample of 341 male entrepreneur and male VC dyads in the context of stage financing, this study finds that VCs of below-average attractiveness are more sensitive to the physical attractiveness of the entrepreneur when compared to VCs of average attractiveness. Also, the nature of this effect changes from the first to the second investment round for VCs of below-average attractiveness. Combined, these findings imply that VCs’ funding decisions may be subject to mechanisms that stem from their own physical attractiveness. Theoretical implications for VC decision-making and same-sex stimuli are discussed.